United States

Georgia creates new tax credit for timber damaged by Hurricane Michael

INSIGHT ARTICLE  | 

On Nov. 17, 2018, Gov. Nathan Deal signed House Bill 4EX, providing a refundable and transferable income tax credit for timber producers who sustained casualty losses between Oct. 9, 2018 and Dec. 31, 2018 from damage to timber property caused by Hurricane Michael.

The credit is equal to 100 percent of the value of the casualty loss suffered in the eligible counties, with a maximum of $400 of credit per acre. There are 28 eligible counties in southwestern Georgia including: Baker, Bleckley, Brooks, Calhoun, Clay, Colquitt, Crisp, Decatur, Dodge, Dooly, Dougherty, Early, Grady, Laurens, Lee, Lowndes, Miller, Mitchell, Pulaski, Randolph, Seminole, Sumter, Terrell, Thomas, Tift, Turner, Wilcox, and Worth.

Eligible taxpayers must meet the following criteria to claim the credit:

  • Timber producer that suffered a casualty loss in one of the participating counties;
  • Replanting efforts of timber in the same county in which the loss occurred;
  • Replanted timber is projected to yield, at maturity, at least 90 percent of the casualty loss claimed for the credit;
  • Credit is claimed in the same tax year as the completion of the replanting efforts; and
  • The credit must be claimed by Dec. 31, 2014.

To claim the tax credit, a taxpayer must submit an application for pre-approval based on timber casualty losses incurred. The application window begins on Jan. 1, 2019, and ends on May 31, 2019. The state has placed a cap on the available credits of $200 million for all taxpayers. If the amount of credit on total applications exceed the cap, the state will prorate the credit amount among all applicants. If the cap is not reached in the first application window, a second application window will open on July 1, 2019. The credit is fully refundable and can be transferred to third parties with approval from the Georgia Department of Revenue.

Takeaways

Companies that suffered casualty losses of timberland in southwestern Georgia as a result of Hurricane Michael should evaluate eligibility for the new timber tax credit. The credit is fully refundable or transferable, so even tax exempt companies could benefit. Companies should consult with their state and local advisers to evaluate eligibility and prepare for the first application window that opens Jan. 1, 2019.

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